Cabinet panel clears Federal Bank's proposal to increase foreign equity to 74%

The Cabinet Committee on Economic Affairs (CCEA) has approved Federal Bank's proposal Limited to increase its foreign investment limit to 74 per cent, subject to the aggregate foreign institutional investors' (FIIs) shareholding not exceeding 49 per cent of the paid-up equity share capital of the bank (See:Federal Bank seek FIPB nod to up foreign holding).

The approval would result in foreign investment of approximately Rs1,400 crore in the country, CCEA said in a release.

Kerala-based Federal Bank is already majority owned by foreign investors and has sought regularisation of its ownership structure through a formal approval from the Foreign Investment Promotion Board (FIPB) and since the investment is over Rs1,200 crore, from the CCEA as well.

The bank had earlier reported to have received FIPB approval for hiking foreign shareholding limit to 74 per cent (which includes 49 per cent to FIIs, 24 per cent for NRIs and one per cent to overseas corporates).

The FIPB approval was required to maintain status quo of the limits and hence the Reserve Bank of India asked the bank to get it cleared by the former.

Federal Bank approached the FIPB, as the Reserve Bank in August 2013 had prohibited foreign institutional investors, non-resident Indians and persons of Indian origin from purchasing shares in Federal Bank as its foreign holding had crossed 49 per cent.

Subsequently, FIPB in October last year cleared the proposal to raise the foreign investment holding.

As of September 2013, FIIs held 44.11 per cent in the bank, domestic institutional investors 20.60 per cent and others 35.29 per cent.